Further changes with regard to real estate investment trusts (REITs) and the deduction for interest on self-occupied property being increased up to Rs 5 lakh are expected by the real estate sector in Budget 2017, said Abhishek Goenka, partner (real estate), PwC.
Goenka was responding to questions during the Business Standard live chat on what the real estate sector should expect from the coming Budget.
Further, the sector is also expecting a change in the tax deduction limit on housing loans. Goenka said that the sector expects that the limit of Rs 200,000 would be increased to Rs 500,000. This would positively impact the sector.
Good for buyers
The Budget is expected to increase the deduction for interest payments and also reintroduce the standard deduction, said Goenka, adding that these should make the effective cost of borrowing cheaper. With fall in interest rates also, this would overall augur well for home buyers, he said.
GST to have an overall positive impact on sector
The goods and services tax (GST) should have an overall positive impact on the real estate sector, said Goenka, adding that the duplicity of value-added tax and service tax will be eliminated under GST. However, Goenka said that some of the restrictions on credit that are in the model draft law need to be addressed and there should be a seamless flow of credit in order for the sector to truly benefit.
Consolidation, driven by RERA, likely
Mergers and acquisitions (M&A) and consolidation in the sector will be driven by the Real Estate Regulatory Authority (RERA), said Goenka, adding that smaller developers will also enter into collaborations and joint developments with larger players. However, he explained that M&As in the online space reflect trends of the start-up and e-commerce sector more and less of the real estate sector.
Demonetisation has hit sales in the sector
Expressing his view on the demonetisation exercise’s impact on the sector, Goenka said that it has had an impact across sectors and real estate has certainly been impacted. The drop in consumer spending and the sentiment to not make big spending decisions is impacting sales in the sector, he added.
Fundamentals are strong for the sector
Responding to whether the slowdown in real estate would continue, Goenka said that 2017 would continue to see some lull for the residential sector. However, he added that as some of the existing inventory is liquidated and investors get their confidence back, the sector will pick up. There is a real demand for housing and the fundamentals are strong, he said.